Bits Bucket And Craigslist Finds For December 21, 2006
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The Housing Bubble
Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
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Global Rebalance, Consumer Imbalance, us spillover risks
outlook pimco 2007
lots of comments on the impact of us housing on the us and the economies worldwide
http://www.immobilienblasen.blogspot.com/
Great article. The final three paragraphs about China and emerging markets point out that over time, they will be the economic powerhouses and consumption in those countries, especially China, will make U.S. consumption of Chinese goods relatively insignificant. In the long term, emerging economies are the place to put equity money in. That’s what I meant a few days ago when I recommended increasing the percentage of one’s portfolio in international stocks, particularly in emerging economies.
Also if the U.S. cuts interest rates, the article pointed out, it will be for priming the economy, not as a reaction to any perceived deflationary forces. Deflation is certainly happening in real estate, has been happening in high tech electronic goods for more than two decades now (computers). But inflation has been roaring in health care costs and college costs. When the oil runs out in the Middle east, prices per barrel should exceed $100. Bottom line is that Ben is starting up the engines of that helicopter and this should be good for precious metals.
Whe oil runs out in the ME prices per barrel will exceed $10,000 per barrel. This is a long time away. However, if their are disruptions or changes in trade patterns or changes in the value or acceptance of the dollar, oil will exceed $100 per barrel quite quickly along with shortages in the US.
If you think the suburban McMansions are depreciating now…just watch what happens if this unfolds.
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we have plenty of oil in this world and technology is finding new ways every day to find and collect more.
Gekko, obviously you have not read Matthew Simmons’ “Twilight in the Desert.” It’s getting harder and harder to find new oil fields. Yes, technological advances helped, but no super giant oil fields have been discovered since the 1940s / 1950s. The giant oil fields, such as in the North Sea, have gone past peak. Dick Cheney, himself, admitted oil consumption is increasing 3% per year while production is increasing 2%. It’s a slow depletion, but the wells will run dry.
gekko is right.
there are 2 TRILLION (yes, NOT a typo) barrels of oil in Canada in the oil sands (recoverable at $20 per barrel).
1 TRILLION barrels of oil can be made from the coal alone in the US (coal liquidfication)
and I forgot about ethenol (supply is theoretically infinite, as long as there are farmers).
“there are 2 TRILLION (yes, NOT a typo) barrels of oil in Canada in the oil sands (recoverable at $20 per barrel).”
I disagree with this statement. They need a great supply of Natural Gas to heat the tar sands to recover the oil. Furthermore, they need a great amount of land to dump the wastes.
“there are 2 TRILLION (yes, NOT a typo) barrels of oil in Canada in the oil sands (recoverable at $20 per barrel).”
Harvesting the oil sands is akin to strip mining. Although there is a great quantity of oil there, it’s devastating to the landscape such that it’s much different then simply pumping oil out of a hole in the ground.
Not to mention, as the cost of oil goes up, the increases itself will be the real impetus to drive the development of new energy technologies. One day scientists will figure out fusion.
Solar will never be a cost efficient energy source. Assides from geothermal, wind is currently the best source of ‘free’ energy, problem is the windmills are loud and ugly, and you need a way to store the energy. Nuclear power should see a resurgence although there is a finite supply of uranium. This can be countered with breeder reactors. Extracting hrdrogen for fuel cells requires a huge amount of electricity. Ethanol may take off, but corn is really inefficient for production, sugar cane is far more productive. Also, you have distibution problems with ethanol, they need special dedicaited pipelines, otherwise it has to be distributed by tanker truck, again using fuel.
yes you are correct on the numbers on the tar sands. you are also correct on the natural ga required, but we have a oversupply of that commodity. the waste factor depends on how you look at it … returning sand back to the pits minus some amount of oil could be considered to be cleaning up a natural spill. The natural environment will change , and I am not going to debate wether it is good or bad. what people forget is steam to remove the oil, this requires water and such limis the amount to be recovered. The newer projects require recycling of the water, and i think we are in the last major project(petro Canada) you will see for awhile. There will be smaller ones though. Now if you were to assume this oil is destined for the usa you could be mistaken . trade tariffs have always been used to prevent a cheaper product from canada entering the usa . This is lobbied for to protect your jobs supposedly and but mainly protects the assets of the rich. I see the same thing hapenning with oil from canada. does it worry me ? NO. we are used to it and are presently courting China. China is investing in the oil sandsand our resources. They however are not our preffered customer , but we do find so far they treat us fairer. The ball is in your court on this one ,but dont expect us to wait for us fair play. Howerer we aretollerant
the idea that we will run of oil in the *near* future (a hundred years or so) is probably not true. consider that oil reserve is based on extractable oil at a given price. the higher the price the more capital will be available for extraction. the problem with the peak oil theory of simmons is that during the time he wrote that book, russia, canada and venezuela were not as big players as they are today. russia now exports (or was it produces) more oil than saudi arabia. venezuela is asking for reevaluation of oil reserve because at current price they have believe they have more extractable oil than saudi arabia (you can argue that saudi oil is of higher quality and cheaper to extract, but that is besides the point). canada now views their oil sands as economically extractable reserve oil. furthermore, even if we reach peak oil *production* (not running out of oil), it will still be available at higher price. that simply means there will be a point that demand will just about equal production. of course, it will not be economically ideal but we will still have it . for a long long time.
the usa reached its peak oil production in the 70’s, we are still producing ample amount (if I am not mistaken we are the 4th largest producer in the world).
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Never bet on the end of the world - it only happens once.
If we keep the constitution alive I am a long term bull for the US. However almost every dominant culture has had their day in the sun… By the way I really appreciate your postings. The main reason I check out this blog & others is that I feel I am getting a more accurate view of the world than I am from MSM
my only advice is to stay diversified, because nobody knows the future. this includes cash, bonds, stocks, and real estate. spread your risk and never bet on the end of the world!
Is what happened in 1929 to 1937 consideed the “end of the world?”
1914 to 1917?
1940 to 1945?
How about 1963 to 1972?
The term “end of the world? could be defined by some as to mean an involuntary change in lifestyle. Not death per sey.
Ageed diversification (don’t forget gold & silver).
“Never bet on the end of the world - it only happens once.”
What’s worse, you never get to collect your winnings…
The world will go on merrily after the oil age. It’s the people who have a problem. Betting against peak oil is naive and dangerous to your survival.
People have been talking about Peak Oil since the 70’s. I was in grade school and still remember the scares that the world would run out of oil by 1984. Someone made a lot of money betting against peak oil.
Price won’t reach $10k per barrel (unless the value of the US$ drops to 5% of what it is now) because demand will drop as price goes up. Would you drive your car every day if gas was $500 per gallon? But one thing to bear in mind is that the estimated reserves are not the same as the available reserves. As an oilfield reaches 50% depletion it gets harder and harder to get the oil out. First they inject water, then steam, and in the end they are not going to get the last 30% out with todays technology.
oil reserve is based on extractable (not available) quantity at *a given price*. the more depleted the well the more expensive it is to extract the oil. at higher price per barrel, the more can be *economically* extracted.
Even if we run out of oil, there is a lot of coal left on this planet. While dirty, it is still cheap, and I assume most of the world would run cars on coal (whether directly or via coal fired power plants delivering electricity) unless a new technology came cheap and easy (i.e., no difficult infrastructure changes needed).
You can’t run the world as it exists today, on coal gassification. We built the world, the economy, and our lives, on cheap oil period. It’s coming to an end. You don’t have to run out of oil to destroy our economy. Just supply disruptions and increasing prices will do the job nicely (saudi arabia coup, nigerian shutdowns, hostile producers, etc.) These events are already in motion, and I am always surprised how many people can recognize a housing bubble, credit bubble, etc. but deny the existence of Peak Oil. The age of sprawling suburbs and breakfast trucked from California is finishing, whether you accept it or not. I choose to conduct myself accordingly.
diceman - You are absolutely correct. I, too, make my choices to maximize comfort/minimize impact, prepare to the best of my ability for serious unknowns… Playing ostrich in this one is going to be deadly.
Nigeria is really heating up. More attacks today closed foreign oil facilities. Saudi Arabia government is looking very fragile. Tipping point is coming.
i like this one
The U.S. remains the world’s bass drum.
And I like this one: “Over time, continued growth and a shift towards consumption will mean that China will indeed emerge as a second global bass drum. For now it is the high-hat cymbal.”
Invest accordingly.
Check out the chart on jmf’s link that shows GDP vs. GDP without Mortgage Equity Withdrawal. GDP goes negative for a lot of the years since ‘01 without MEW.
Lordy..
Nice (front page) story in today’s Boston Herald about scummy mortgage scams in Boston. People now losing their homes.
http://news.bostonherald.com/localRegional/view.bg?articleid=173199
While it is somewhat sad these people are losing their houses around Christmas, they share a lot of the blame (hello? signing blank loan documents?) so I really don’t have a lot of pity.
I don’t either. None. Notice that despite the fact that one is losing the house to foreclosure, she’s still got time to pump out the 4th kid. Sickening.
Where were this guys friends and family when he was signing these documents? People need help with this stuff. It’s complicated and not everyone is good with financial statements.
Need help?? Someone who signs a BLANK loan application is beyond help. This is a person who is a danger to themselves and society.
This isn’t about doing math and this isn’t about coaching financial savvy. Adults who engage in this behavior never learned and never will learn what is good for them and will act opposite of any guidance you can offer.
I’m just saying the guys an idiot.
Saying he’s headstrong might be giving him too much credit.
It suggests a head.
That’s the problem with the Public Screwels, they don’t teach basic economics and the teachers don’t care. Oh yes, they care about their pensions,benefits, vacations, ‘work’ 6 months a year, pay, and tenure so you can’t fire them. I want to heave. Public employees (including fire and police) are the same way. Boy I feel better now. Merry X’mas to all!!!
Teacher can’t get all the blame here. They have to teach a certain curriculum.
Yes, consumer finance should be on that cirriculum.
I couldn’t agree more…
Oh Please. How about parents teaching their kids how to think for themselves and be financially literate? My kids public school teachers, for the most part, have been dedicated individuals. It’s not there job to make sure my kids get what they are teaching - that’s my job. Period.
Amen. If parents would stop treating the public school like a babysitter, then things might be different. Time to bring back corporal punishment…
Not everyone is good at math and finances. That’s Ok. You might be good at something else. But for Pete’s sake people, ask for help from friends and family when you’re looking at loan docs.
A comment so nice
I put it up twice.
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anyone else find it ironic that if they DIDN’T get the loan, they would have probably sued for RACISM. and now that they DID get the loan and can’t afford it, they’ll sue anyway.
anyone?
A reasonable stretch but a stretch nontheless!
Bueller?
At first I thought Gekko was an ignorant republican racist, but then I figured it out. He’s just kidding. No one is that deliusional and full of hate. He just wants to poke to bears.
posted “At first I thought Gekko was an ignorant republican racist, but then I figured it out. He’s just kidding. No one is that deliusional and full of hate.”
I have the same thoughts and have gone after him…. for those same reasons…. I agree nobody could be that dumb or unreasoned….Peace Bro! Peace!!!!
I’d feel much better if the scammer’s families were out on their a**es as well, or maybe instead of. Why are the banks going after the one’s that have no money for a legal defense? An easy score? Why do I think the scammer’s families are still living large in NH where they’ve got a great defense team lined up to allow them to walk?
26 inches of snow today. Home buyers are advised against unnecessary travel.
Joys of living in Colorado. We have 5 foot snow drifts outside.
It doesn’t happen too often. I’d still rather be in CO then in CA. Sigh.
ROTFL, you do realize that the bad December real estate sales will all be blamed on the Denver storm.
That will somehow include Florida.
Neil
The Denver airport is closed. The snowbirds can’t fly to FL to buy their ocean side palaces. Of course the housing slowdown in FL is all due to the weather. The spring bounce will happen when DIA reopens and the snowbirds can fly east for the winter.
46 degrees here in Syracuse….my skis are gathering dust!
Heartland Homes is a local Pittsburgh builder that does a decent business (375 homes sold in 2005). They’re starting to play hardball. We got a new client in the office this week, a 40-something couple who put a 10% deposit down on a 350K home built by Heartland. The home is now complete but the buyer is suffering buyer’s remorse and wants out. They wouldn’t even care so much about losing the deposit, but the builder is threatening a suit for damages (original contract price plus attorney’s fees, less resale amount, less deposit kept). Builder’s attorney is one big SOB (I’ve dealt with him before when he represented yet another builder, but in an estate matter), the seek-and-destroy variety of litigator. Should be interesting.
10% down on 350,000 bananas and finance the balance? If that is the case barrister, your client is an imbecile.
isn’t a 90/10 deal considered conservative these days
10% DEPOSIT. And what is he if he puts down additional monies at closing?
What if there are little green men on the moon eating cheese?
Dude, how the hell do you know what this family’s financial status is??
You need to scroll up and read the response foolish.
You might be wrong on that one Captain Credit. We put $1000 down on our first home when we paid $40k toward the purchase at closing. Why should the banks make the interest?
I agree Carrie. I would have done the same in your case. But then again, I prefaced my original comment with “if that is the case”. Aside from that, Tom has this propensity to hang on my every word here. Kind of like a schoolgirl crush.
If HH is successful, what would prevent them from selling the home below cost to a third party, collecting the deficiency between the contract price and selling price from your client, and then reselling the home at market price at a later date?
Specific performance is a bitch, eh?
I think you’re going to see a lot of this type thing shortly.
Have not seen it used much as a seller’s remedy. Now’s the time you wished that 3% liquidated damages provision had been checked on the deposit receipt contract (here in Cali). Anyway compensatory damages are enough and more appropriate. Seller has a responsibility to mitigate damages and the way to do that is find another GF, unload it, and sue based on benefit of bargain as opposed to specific performance.
god, I’m losing my mind. I was thinking about those cases where the people put deposits on condos and the developers decided not to build
I understand that loosing one’s mind is a common occurrence when people migrate from California to Texas. Of course the loss may have already manifested itself before their departure date, which would go along way towards excusing their actions, characterizing their move as involuntary and a byproduct of their disease.
TxChick have you ever practiced RE law? I just read the definition of specific performance on wikipedia and it seems to point in the other direction so to speak. It seems like it is intended to force the seller to deliver, not the buyer, mainly with respect to land and I would suspect RE. It would seem obvious to me that the builder can force the buyer to go through with it, but not in that way.
Josh
see above. that’s what happens when I try to multi task
“I think you’re going to see a lot of this type thing shortly.”
Then they’re betting some pissed off defendant doesn’t bring the MSM in on the story, which would really cut back on anyone giving them any deposits in the future. Very short term thinking here. They must be feeling pretty desperate.
I got a judgment against a guy from Panama who pulled that in the late 1970s — he tied up the property for months in prime time. Had the judgment recorded. Sure enough, almost 20 years later he shows up in the same county, trying to buy, and bingo — judgment day. I had mellowed enough that I was satisfied with just the hassle for the SOB, but told my attorney he could keep whatever he could recover, if he were interested.
My recollection from Business Law is that specific performance applies to all parties in the contract.
people should honor thier contracts-plain.simple
“the seek-and-destroy variety of litigator. Should be interesting.”
Go get ‘em, winjr!
Sue your customers!
Wow. Must have missed that strategy in marketing school. Desperate times.
This has come up in my state of New York. Our Supreme Court ruled you can force a seller to sell but not a buyer to buy. It will tie up the house for years. Why would a builder tie it up especially if another buyer shows up. He will not be able to sell. He is just trying to scare them, playing a game of chicken.
Did you ever think that maybe, just maybe, the man featured in the Herald article had long belonged to the formerly 40 percent of American adults who had never before been able to break into home ownership? In the past few years, they suddenly saw an opening. From what I can surmise from reading one article after another about the sub-prime situation, they were most often people who never went to college, never had been told before that they would qualify to purchase a home, never had had good credit records (they were usually pretty low income and just scraping by). Suddenly, someone grabs them and whispers, “Sign these forms and you will finally own the house of your dreams”–or something on that order.” For most people, it would seem to good to pass up, non?
You don’t have a “lot of pity” for these people, but wouldn’t it be fair to acknowledge that they were sold a bill of goods and therefore were more unwitting victims rather than deliberate villians? Not pity, but “understanding” seems in order.
Susan,
You’re speaking directly to compassion, and although I agree with you generally speaking, I don’t think you’ll find a whole lot of it here. I believe there are many victims of the “economy is wonderful” brigade of pimps. The Herald article is proof of it. Nevertheless, the ideology of economic lunacy of which the housing mess is a symptom, is a failed ideology where the masses are separated from their wallets to benefit a bitter, angry minority. It is also a failure of leadership. Just last nite, I listened in disbelief as our commander in chief said the solution to the Iraq debacle is to…. get this….. “go out and spend more”.
And the way to raise the minimum wage is to give it back by giving tax breaks to small businesses.
I’ve had about a boatload of that garbage. I’m fighting with the IRS over self-employment taxes which I don’t owe and they say I do. It’s maddening to listen to that junk.
So, are you self employed or are you not??? Pretty basic. As far as minimum wage– Why not offer tax breaks to small businesses if they are asked to take the brunt of the minimum wage hike? Like it or not people, our future is tied to small business. Isn’t the big complaint here all about big biz exporting jobs??
I think (this is not an original idea — pinched from an LR article) that in lieu of part of the minimum wage increase, we should require that anyone below the poverty line receives at least $3,000 for whatever car they sell, no matter the condition, no matter to whom.
Instead of offering tax breaks, maybe the government could offer to help small businesses with health care for the employees. Should cost about the same, but a better option (and more likely for the Dems to pass) because it encourages business start-ups and hires. IMO, I like it when the gov offers “stuff” incentives instead of cash. Businesses owners can pocket cash for themselves, but you can’t do that as easily with stuff. oops I think that’s “demand side” econ.
interesting… start with health care reform for small companies and see what happens… I Like it.
Check out Senator Wyden’s new health-care plan.
Me too!
Good idea.
OT, but: Our local news reported that the government was planning on helping families by helping them with childcare expenses which could equal ~25% of the family budget.
In the next breath, we were told they would also help families by increasing minimum wage.
I did the “Geico Caveman” eyeroll that no one seems to process those 2 will cancel each other out.
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everyone is a victim these days. everyone has an excuse. everyone wants to blame someone else. what ever happened to personal responsibility? what about living within your means? in my book, a poor man should live like one. these are probably the same type of people that spend all their paycheck and their available credit on shiiit that they don’t need or couldnt afford. no, i’m not acknowledging any “victimhood” or “understanding” here and going down that slippery slope - because at the end of that slope is a taxpayer bailout.
In Defense of Scrooge
http://www.mises.org/fullstory.aspx?control=573
Societies work best when folks on the lower rung have a chance to climb up a little….gradually the USA has worsened in this area and this is not a positve trend. How we treat and care for others less fortunate than ourselves is in part a good measure of our own character.
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There is no better country out there than the USA where folks on the lower rung have a chance to climb up - way up - if they want to work hard, save, and sacrifice! Why in the hell do you think so many people are risking their life and limb to get here?!!!
That is the point… the man in the Boston Herald article was taken advantage of, clear and simple. He states that he expected a $1500/mo payment and got a $3000/mo payment. He states that he has burned through $20,000 of SAVINGS. From what I can tell, he was just trying to do right by his family by providing a decent home. He obviously has some work-ethic since he managed to save $20K, which is rare in today’s consumer/credit driven society.
I have every sympathy for this man and his family because they were slowly moving up that ladder and got knocked down by cheats and liars. The only fault I can see was he wasn’t savy enough to understand in this day you need a lawyer to protect your interests.
I am not a very religious person, but I will pray for him and his family. How can you not find sympathy in your heart for stress and heartache his family and children are going through…
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he probably would have sued citing racism if he didn’t get his loan.
rather than pray, why don’t you send him a check or invite he and his family over to your house for Christmas dinner?
I was actually thinking of doing just that… send him a check that is. I would have sent it to a charity or wildlife/environmental protection group anyway, but this particular story really resonates with me.
In my relatively short life, I’ve experience wealth(stock options) and had it taken away very suddenly(dotcom bust). I’ve experienced firsthand offshoring and wage arbitration. I have a family and two young children and know how difficult it is today to raise a family. I know what it means to struggle to better yourself and your family. I know that my family was there to help when I needed it, and if this family doesn’t have that safety net, they will be in trouble. My small contribution may mean nothing to them, or it may mean everything…
BTW, Gekko, you’re the millionaire, why don’t you open up your wallet and help this family out? Or is that just too liberal for you. They should just suck it up and live with their mistakes…
Northeastener:
I predict the next Bubble: FBs advertising their plight in MSM in order to elicit contributions from sympathetic HBBers…
KIDDING!
Actually, NE’er, I know a young single mom who is having financial difficulty, and intend to gift her a Whole Foods card that could spot her a couple of weeks, at least. (She would never take the cash outright…whatever.)
From reading this blog a while, it seems quite a few posters have experienced the material wealth rollercoaster, and most have learned from it. I’m going to go out on a limb and say that even though some of us may sound like harda$$es at times, scratch the surface and you’ll find a decent, caring blogger.
Except we draw the line at taxpayer bailout for FBs…
Gekko wrote: There is no better country out there than the USA where folks on the lower rung have a chance to climb up - way up - if they want to work hard, save, and sacrifice!
I agree this was true for some time. Not surprisingly that was the time when schools in this country were good. Somehow (I don’t presume to know how this happened) we have stopped investing in education (the only real social equalizer) and throw money hand over fist into things that only create the kind of entitlement mentality that so rankles you (me too, sometimes). I wish people were out on the streets demanding a better education. This is what we owe them as a country, and in this we have failed.
The poor dare to want more than they can afford and that caused Greenspan to keep interest rates at zero while regulators looked the other way and obvious fraud in the form of bad loans passed along in packages. No matter how awful poor people are that does not let Greenspan or any fraudulent lender off the hook.
Actual studies of what is going on show that it is increasingly difficult if not impossible to get far ahead once poor and extremely easy to loose everything if one is merely middle class. The only people assured of opportunity in this country are the rich and census data shows that. No wonder agendists ask what the Department of Labor is for.
That’s a very enlightened way of looking at things; unfortunately, it doesn’t play well in the “gimme gimme gimme” society we now have in the US
the USA has the best opportunities in the entire world for rags to riches. Look at the new Will Smith movie based on a true story.
However, having the opportunity to succede is not exclusive of the opportunity to be a moron.
As Carlos Mencia constantly points out, there are a lot of DEE-DE DEEs in this country.
Carlos Mencia’s video on dump people
definitely applies to GFs and suicide loan applicants
http://www.youtube.com/watch?v=0h0z6vkcY10
“what ever happened to personal responsibility?”
Really. 3,000 dead American kids in Iraq (god knows how many Iraqis) and hundreds of billions of dollars (soon to be trillions) gone down the toilet. So when will we see accountability for that?
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Ben!
lol, saw the thread last night
They believe in pulling themselves up by their bootstraps, on never needing a dime of government assistance…well, time for them to demonstrate the strength of their beliefs.
Waiting……..
threadjack
really out of line for this blog
in my book, a poor man should live like one.
In my book EVERYONE should learn to live poor. Whether or not they have to, they should know how to. I’m not talking living-on-the-streets-in-a-cardboard-box, but I am talking about living very modestly.
“but I am talking about living very modestly.”
Not to argue your point, as I agree that , for me, living modestly to the extent that savings and real investing takes a priority over and above casual spending. But I wonder, with the modern division of labor, how high would unemployment be if everyone cut back on all or even a significant amount of spending on nonessentials.
Modern technological advances have reduced the number of jobs required to supply basic necessities.
Could the economy absord all the boat builders, liposuctioneers, hair transplanters, dog groomers, tatoo artists, beer brewers, pet funeral directors, etc…?
Not that joesixpack needs any of those things, oh no, but if they did not have jobs, what would they do?
I could be wrong but in murder cases, doesn’t the defendant that planned the crime do more time than those that went along for the ride?
Weren’t the mortgage scammers the ones that planned taking value from the banks and the one’s that went after the subprime clients to make it happen.
Gekko, I don’t know why you hate people so much, but you seriously need some kind of attitude adjustment. The way you treat people gets reflected right back throughout your life, remember that.
Please spare us the victimhood stuff. Did you ever think they’re the same people that screwed off in school, always looked for the easy path to riches and were smart enough to “game” myriad welfare or entitlement programs, skip when the rent came due, and would sue you in a minute if you tapped their bumper in a traffic accident? People are smarter than you give credit. They knew exactly what they were doing, they were complicit and now they get what they deserve.
Moreover, how come the elite lenders did not sign up poor people in fraudulent real estate loans in the previous bubble (late 1980s) in Real Estate? The lenders were not greedy in the Reagan / Wall Street / Republican era?
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“You gotta rob to get rich in the Reagan era.” - Nino Brown, “New Jack City”
Umm hello S&L debacle? Seriously, you must be joking.
“Umm hello S&L debacle…”
Yes but that is welfare for the rich. That doesn’t count!
It’s just the poor ignorant slobs that should be held accountable.
And let’s not forget the Continental Bank bailout also under Reagan.
No, that was Bush the Sr. blueblood.
Realize how the S&L scandal started. Congressman Ferdinand St.Germain (D-RI) of the house banking committee managed to raise the insurance covering accounts from $40,000 to $100,000. He then presided over the deregulation of S&Ls.
Remember, this was a time of double digit interest rates. High yielding, insured, CD’s were very hot and the S&L’s used stock brokers to sell their (now) BIG chunks of CDs (if they hadn’t been in such big lots, brokers wouldn’t have sold them).
The funds directed to S&Ls exploded. They took the money in and, since real estate was all they did, just about anyone who wanted to be a “developer” could get cash from an S&L. Prices of all kinds of RE jumped as everything was “developed”. Then the game stopped and the “Bail out” ensued.
So it was another crisis generated by stupid, wholesale (if not corrupt) changes in regulations and the fascilitation of liquidity (more than doubling the FDIC insurance).
Reagan’s doing? Nope. St. Germain, Jim Wright and the majority party of Congress of the 1980s. Guess who?
“screwed off in school”
Yup, and cheated on tests.
“Not pity, but “understanding” seems in order.”
Articles about mothers facing foreclosure could begin to soften the American public and pave the way to bailouts. These people need to take their medicine. Freedom can be tough.
“These people need to take their medicine”…..You win. Most of them will go into foreclosure, file for bankruptcy, whatever. Their already low credit scores will fall even further. They will join, or perhaps rejoin the underground economy. But in my judgment those who really need to take the medicine are the lenders et al who underwrote these loans. But guess what? When the house of cards collapses in the financial markets, we (the American taxpayers) will be the ones taking the medicine. I fear those who believe otherwise are as naive as those who signed up for the sub-prime loans.
“I fear those who believe otherwise are as naive as those who signed up for the sub-prime loans.”
That statement implies those without any sensibilites or compassion would actually think through the problem with logic.
Good luck with that one.
But guess what? When the house of cards collapses in the financial markets, we (the American taxpayers) will be the ones taking the medicine.
Susan, most of us know you are a REaltor. Be honest: were YOU sounding the alarm when home prices were rising all out of proportion to local median incomes? When buyers were waiving pre-closing inspections? When all the traditional rules and dictums of home-buying were being thrown by the wayside because IT’s A NEW PARADIGM…?
I truly don’t mean to be contentious with you. But I used to work in the REIC, and none of the salespeople in my office had any attitude except throw those houses up fast as you can, boy, and get the people to sign.
So now you’re talking about a financial house of cards collapsing.
Welcome to the party.
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Sounding alarmas? No, Susan was probably whispering “Sign these forms and you will finally own the house of your dreams.”
None of you know me but yet you assume several things about me that are patently untrue and nothing that I can possibly write would convince you otherwise. But, once again, may I say that I fear for our country when people feel that they can judge the actions/work history of someone they don’t even know? Is that intellectually honest? Or doesn’t intellectual honesty matter to you if you can have the last snarky word? If this is what passes as engaged discussion in our country (or on the internet), then God help us.
RE agents believe in God? That’s a new one.
Boy! Everyone hates realtors! I am a retired social worker turned realtor. I am sorry that everyone has had such a bad experience. Guess what? There are bad folks in every profession. Ask to speak to past clients when you are looking for a realtor. I retired from Catholic Charities, yes some of believe in God. But, that is not why some of us are honest. I read this blog to learn about current trends to pass on to my clients. So give us a chance,if we are here reading some of your words of wisdom, we want the information even if its not always rosey.
If this is what passes as engaged discussion in our country (or on the internet)
If you are truly interested in engaged discussion, then why aren’t you answering the questions asked of you? Instead, you’re changing the subject by lamenting about O, what a hard world it is because everyone is so mean to you.
Believe it or not, we on this blog can be convinced otherwise, and we value and reward intellectual honestly. For example, there are plenty of fraudulent mortgage brokers and shady housing appraisers out there. Yet there are several mortgage brokers and at least two appraisers on this blog whom we trust, because they are honest with us and answer our questions.
However, you are avoiding a key question: were YOU sounding the alarm when home prices were rising all out of proportion. Is is any wonder we’re still wary of you?
Glenda the Good WItch:
I give credit to you or Susan J or any self-identified Realtor who shows up on this board and takes the flak.
(see oxide’s comments above)
I’ve been involved in RE in one way shape or form my whole life, since my dad was in the biz. I came away from my work experience in the REIC with the understanding that a lot, not all, realtors are a step above used car salesmen. Unfortunately, my recent experiences as a prospective home-buyer have only soured me more.
Just one example: a REaltor guy I know, from Church started out fine showing me places, then tried to get me to overextend myself! Commission trumps friendship.
When it’s time for me to pull the trigger, I do know a REaltor friend with whom I’ll do business. In the meantime, if you want to share this blog’s wisdom with your co-workers, just spread the word that the market is oversold until 2009, at least, and prices will have to come down dramatically in order to jumpstart sales.
Thanks!
I have been reading and sharing for a few months. Just started writing for a few weeks. Knowledge is powerful.
“None of you know me but yet you assume several things about me that are patently untrue and nothing that I can possibly write would convince you otherwise.”
The tone of all your posts, the announcements about your various professional activities and the links on your web site speak volumes…
Susan wrote:
But guess what? When the house of cards collapses in the financial markets, we (the American taxpayers) will be the ones taking the medicine.
You are right, Susan, and in this blog you have stumbled into a bunch of people who, for all their differences, have known that for a long time and feel angry, depressed or impotent about it. I know from experience that it is very difficult to swim against the tide all the time. These people have seen the train wreck coming for a long time and don’t have a lot of sympathy to spare for those who chose to jump in the bandwagon and milk the boom for whatever it was worth, the future be damned, the country be damned. They would feel sympathy for someone who did everything right and still was caught in the fallout, but they can’t summon a lot of pity for people who are cold blooded enough to ensnare a poor man in a bad loan, nor for the man who was foolish enough to think that everything would be OK if he just signed the papers. These bloggers have paid their own price for their choices (like being the laughingstock of their families, fighting with spouses or being subjected to countless sessions of “equity gains” discussions with friends) and they don’t see why those people shouldn’t get their comeuppance. That said, I have a reserve of pity for people who are not sophisticated enough to understand what a loan means. I pity them because they will pay the highest price, a lot more than the scammers and the bankers and the politicians who allowed this to get out of control.
We are the Champions my friends,
And we’ll keep on fighting to the end,
We are the Champions,
We are the Champions!
No time for losers, cause we are Champions of the World!
(Bubble sitters’ anthem, with apologies to the late Freddie Mercury)
Get Stucco: I have no idea where the “link” to that website via my name came from and that is definitely NOT ME when when you follow that link to the Susan/Wisconsin post. I’ve written that before when others here accused me of working in debt consolidation. Ben: would you help me remove that link since it never came from me? I’ve tried, but can’t figure out how to remove it. In addition, Get Stucco, please help me out a little more: What are you referring to when you write about my “announcements of my professional activities” and the “tone of my posts?” Do you mean the ones where I urge people to refrain from judging others when they don’t know the full story?
Forgot to answer Oxide’s question to me as to whether I was sounding the alarm when prices were “rising all out of proportion?” As I’ve written before on this blog, I work in Wisconsin in a long-established area with little new construction. The big price jumps of the past five years in California, parts of Arizona and Florida, for example, didn’t ever appear in the local market where I work. Prices basically went up at inflation rate or slightly above. Which begs another point: many posters here seem to forget that real estate is local and people in the Midwest (at least where I live) tend to be fiscally conservative and highly suspicious of anything that looks too good to be true. So my perspective is different from those posters who have viewed the real estate run-up from their perch in Sacramento or Sarasota.
There was a time in my life when I was scrambling to pay the bills yet I still knew to read documents before I signed off on them.
That being said, I believe there is a strong element of exploitation in this mess, but you know it’s not the first time in the History of the World.
No, it’s not the first time in the History of the World. But if history teaches us anything it is that there when the chasm between the haves and have-nots reaches critical mass, the center cannot hold and turbulent times follow. Few on this board seem to be aware of history. They take the road-most travelled and simply think that their smarter than almost everyone else. At least I can admit that I’m not.
My apologies for theh two typos in my previous post– (remove “there” and make it “they are” smarter.
But if history teaches us anything it is that there when the chasm between the haves and have-nots reaches critical mass, the center cannot hold and turbulent times follow.
Amen, Susan. In this country it is an undeniable fact that the rich are getting richer, the middle class is shrinking out of existence, and the poor are getting poorer. It’s a situation we ignore at our own peril.
An it will never happen in the USA, as long as the dumb-a$$es sitting at home have their cable/satelite TV to keep them happy. I used to go out at night with my F-i-L, who pursued power theft for the electric company, and you would see these horrid shacks with the nastiest people, whose kids were taken away for mal-nutrition, no job, no car, no teeth, but they had thier 50″ TV with a dish to watch all day long, and a steady supply of beer (or drugs), so they didn’t care. It would take a team of cops to hold them off when the power company showed up to remove their illegal tap. After seeing this for years, I realized the safety net had become too high for those caught in it to ever care about anything else. The ones who get screwed with this are the lower middle class who are fighting to stay off the net.
…yet I still knew to read documents before I signed off on them.”
Most folks who don’t know how to swim are smart enough to stay away from water, and even more of them are innumerate, yet they blindly take a seat at the closing table and sign away. The REIC is an industry that clearly needs more regulation since the taxpayers will likely be called upon to make the lenders whole again.
“Not pity, but “understanding” seems in order.”
What kind of “understanding” to you offer to people who sign BLANK loan docs? A permanent ride on the short bus?
Suddenly, someone grabs them and whispers, “Sign these forms and you will finally own the house of your dreams”–or something on that order.”
Yes, this couple were led down this primrose path by an unscrupulous Realtor and and a self-serving loan officer… Any one of these ‘professionals’ that were even peripherally involved in this transaction should have de-railed it before it ruined this couple.
I agree — these are financially naive/unsophisticated folks. Sadly, not everyone has a very good radar as to offers that are “too good to be” and are too trusting of people who promise a lot but can’t deliver. I agree that they bear the first responsibility for understanding and watching out for their own finances — but, on a societal/governmental/business level, we have failed these folks by creating a climate where these scams flourish easily. Not just the pure scams — but the boderline “learn how to make $20,000 a month in your spare time” propositions pitched on cable TV and other amazing wealth “systems.”
A society should protect the weakest amongst us where we can. We are failing in so many ways - and this is one of them.
‘Sadly, not everyone has a very good radar as to offers that are “too good to be” and are too trusting of people who promise a lot but can’t deliver.’
Darwinian principles suggest that the number of such “too good to be true” suckers should steadily dwindle over time.
“Not pity, but “understanding” seems in order.”
I don’t “understand” buying a house, and not being able to make the monthly payments less than a year later (except by job loss or medical emergency).
I don’t “understand” *having* to buy a house, especially if someone puts pressure on you to not get the documents looked at by a lawyer.
Yes, maybe the buyers were uninformed, naive, and a bit too trusting. However, just because they saw “an opening in the housing market”, doesn’t mean that they had to take it. Owning a house is “The American Dream”; however, it is not a right, and not everyone can handle the responsibility. I and my wife rented until we were 35. Maybe some people that “see an opening” should have kept renting.
I can “understand” that this kind of thing happens, but I don’t have much sympathy…perhaps just some sadness.
However, I *do* blame the RE agents and mortgage brokers as well for talking people into buying the rope to hang themselves. Good for business, bad for karma, and what goes around comes around.
Susan,
I would guess that you are of the early Baby Boomer generation, and as such, have unlimited “compassion” and “understanding” for people suffering the consequences of their own bad judgement - so long, of course, as it is the taxpayers who foot the bill. “Poor” and “low education” doesn’t equal “stupid.” My father, a carpenter, never finished college, and after his first wife died, was nearly bankrupted by medical bills - which he paid to the last penny. Despite (or because of) a dirt-poor background he was smart enough to realize there’s a lot of sharpies in the world, and though he was trusting by nature, he was also cautious enough not to be taken by unscrupulous people like, say, realtors, “whispering in his ear.” He bought a small (1300 sq ft) house in LA and raised five kids there. He lived very simply and frugally, and avoided debt like the plague, knowing that it was slavery. A simple man, yes, but not stupid. And while there’s no doubt a lot of not-so-bright people are being preyed on, that has been the case since the beginning of time, and ultimately, “caveat emptor” still applies.
Caveat Emptor. Indeed, Sir. Taking the time to read what you sign your name on - imagine that.
Every mortgage I have ever had - showed ‘mistakes’ in the paperwork - funny how these mistakes always lined the pockets of the loan officer/company (origination fees on a no-point loan etc etc).
Yes, I am an early baby boomer. I’m from a long-line of farmers so, yes, I do know something about self-reliance and staying away from the shysters. My parents worked harder than almost anyone I knew. And, Sammy, I am as unhappy as I assume that you are that we the taxpayers will wind up bailing on the lenders for their ill-advised loans. But if I were a betting woman, I say the odds favor a taxpayer-financed bail-out. And do you know why? Because I’ve tried hard to be a student of history.
I am also a student of history. I wish everyone was. When I look at the irreflective, non-reading dolt in the White House and the historically ignorant, realty-adverse coterie around him, for example, I wish I could impress on them the history of imperial empires and forcible attempts to impose pliable puppet regimes, especially in the Middle East. But I digress. Your attempts to add historic context do not go amiss in here, at least for some of us.
Sammy, a few days ago I was saying I wished I could bottle the type of common sense and savviness (does this word exist?) that some of these bloggers have s o I could lace my kids morning cheerios with it. Someone suggested that something they all have in common is a knack for mathematics. I would add to that an interest in history. I am bad at math, but a voracious amateur historian. So I’m getting closer to the formula: 1 part math, 1 part history. What else?
1 part math 1part history 8 parts common sense
sorry, 1part math, 1part history, plus 1 bs filter = 8 parts common sense. however needs to equal 100 parts common sense. cant help beyond that
Most important, I would say, is a fundamental appreciation of the fact that nothing worth having comes easy. Also, the ability to learn from our mistakes, and the mistakes of others. Personally, though I’m not terribly religious, I find that reading Proverbs and Ecclesiastes (sp) has always been amazing helpful in terms of providing the distilled wisdom of the ancients. Finally, I think having moral absolutes - the Ten Commandments is a solid moral code - provides a moral compass that steers you clear of a lot of dodgy dealings. But the biggest single factor is making an absolute ass out of yourself, repeatedly, before realizing you might want to try a different approach the next time around.
BTW, Ana Ras, I think it’s very cool that you’re a voracious amateur historian and are trying to impart good sense to your kids. History and experience (lessons learned) are the greatest teachers of all.
Sammy da’ MAN posts ” I am also a student of history. I wish everyone was. When I look at the irreflective, non-reading dolt in the White House and the historically ignorant, realty-adverse coterie around him, for example, I wish I could impress on them the history of imperial empires and forcible attempts to impose pliable puppet regimes, especially in the Middle East. But I digress. Your attempts to add historic context do not go amiss in here, at least for some of us. ”
Sammy you nailed it. I reposted your comments in full becuse they are worthy of repeating. Many people have said GWBush was a product of “gentalman C’s”!!!!
I do study and read History too, not grammer but nonetheless I would bet the farm that the last “book” GwBush read was the TV Guide.
One more thing The “neo-con’s” have dumped GW…. Many Rep’s crossed over, hence the midterm beating. Most people are DEM’s …….. what is he standing on? the 25% or less of hardcore REP’s?.
Now it is “double down” with a duce and a 3….? The Brass say no, the Mid-Term was a referendem on Iraq the little people spoke yet???? On more bright Idea….You know History???
Is GWBush in the Bunker? A mad man moving troops around disconted from the real world? Answer me I say yes he is nuts…. and never read a book in is life.
AE: many reps indeed crossed over, held their nose, and voted for the historically more severe pickpockets than the ones in the rep party. But there is no guarantee they will stay crossed over. GWB is certainly no Ronald Reagan. Face it, neither party has anyone with honest earned charisma, combined with principle these days. I voted Libertarian from 1980 to 2000, I did not vote this year, and if I am able to vote in 2008, I will vote Libertarian then. The Demopublicans have basically become a reflection of American society as a whole. The U.S. economy is in debt up to its eyeballs. The average American is in debt up to his eyeballs. The U.S. govt wants something for nothing. The average American wants something for nothing. In sum, most of us want our cake and to eat it too. It’s an irrational society we’ve become. Well, maybe more mildly, a society in denial. But I certainly cannot vote for anyone in a Party where the spokesmen are Howard Dean, Jesse Jackson, Al Scharpton, Al Gore, Jimmy Carter, and John Kerry.
A un-scientific conclusion the housing market is cooling quickly - I haven’t lately seen any more of those chessy get rich real estate info commericals. I don’t remember the guy’s name but had the buzz haircut and told wonderous tales of buying a barf-hole for no money down and flipping for an easy $17,000 profit…yes…lets all quit our jobs, sell real estate to each other and all become soooooo rich…America will be based on the IOU motto…
I’ll tell you what I am seeing. A proliferation of “you can get rich in the stock market with my top secrety exclusive system” BS again. Usually it’s some moving average crossover that stopped working during the Civil War. I even see some of the the goons on the SDCIA board talking about what great stock investors they are.
Statistically and historically, there is usually one really nasty, scary dump in January. I’d love to see it magnified this January.
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capital chases return. all that money from real estate is now shifting into the stock market and will continue to do so for the next few years.
1995-2000 - stocks
2000-2005 - real estate
2006-2010 - stocks
it’s all cyclical. capital chases return.
Maybe you’re right, Gekko. I know my landlord, who is losing the house I’m renting to auction on January 2 was deciding whether or not to catch up on their mortgage or dump $20K into an S&P index fund.
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i’m talking about the smart money, not your dumb landlord.
About a year or two ago I was in line with your assertion that the money would naturally flow from real estate back into stocks, Gekko. But that idea presupposes a growing economy AND continued easy access to money and credit. Both ideas I now know to be fading.
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great call!
500 Index Fund Adm
YTD Returns as of 12/20/2006
16.10%
Ummm….stocks have been doing great since 2003. RE has been doing great since 2003.
>2006-2010 - stocks
I disagree on this one…should be 2003-2007.
Ditto, TX. I have been expecting this thing to hit us like a ton of bricks in January. Historically, mid-term election year drops occur later (Jan.) than those in non-election years (Sept.-Nov.). Amazing how that seems to have worked since the early 1900s.
I am also hearing layoffs on the wind for January…
The Last Time The Commercials Were This Short….
12/21/2006 10:12 AM EST
The last time the commercials were this short was November and December 2004 which led to a very sharp correction in January of 2005. There is never a guarantee history will repeat itself but it is a major red flag for the bulls short term. It didn’t matter what you owned as the entire market took a strong hit to the down side.
lol..txchick…I luv the new trading software to picking stocks…when it flashes green..buy…flashes - red…sell….geezzz…its just too simple to be true, better buy into this revolutionary software before there sold out…..(visions of gingerbread man danced in their heads)
TrendTrading to Win! All you need is a monkey and a buy key!
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hey Cap’n - where do you keep your money? in the backyard or in the mattress?
Captian Credit…thats the name ..thxs…but you gotta give them credit - the color co-ordination is so helpful during times of serious decision making skills. Yes, I’d like to put $20G’s on that flashing green button right there..nice…very nice.
hmmm…. colors, a green button, fly over country, blind faith and a gripping fear of a religion other than your own is required to be a millionare?
Where do I sign?
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they have to keep it simple - just like the picture of the hamburger, fries, or shake on the register for the peope who work there. just press the corresponding picture.
I’m thinking there might be a nasty little fart next week.
Regarding the get rich advertising scams, I’m a bit disconcerted with the “buy gold” ads I’ve seen in the paper and heard on radio.
Most of the ads touting gold are aimed at one thing, switching you into numismatic coins, a much more profitable avenue for them.
Resist temptation and keep it simple.
Krugerrands
Maple Leafs
Eagles
Buffalos
are easy to buy and sell 1 Troy Oz Coins…
Xactly. I rarely buy the rare coins. The ones I do have are now selling well above the price I paid for them. I focus on Eagles (gold and Platinum), buffalos, Philharmonics, and Maple leafs.
Buy PSQ (short NASDAQ) and DBV (stronger dollar, sort of).
DOG works well for Dow30
lmao….. “dirty daper”……
:) 
So CC, what about gekko’s question??
It’s pretty sad you have to use multiple usernames as a means to force your opinion. Yet they’re rejected anyways.
Nice try though.
Multiple user names? No, just another person who is getting hip to your crap.
BTW, if I’m not mistaken Gekko is on the east coast and I’m on the west coast. I was just hoping you could enlighten us with your investment thoughts for the coming year…
sorry, not me, silly.
Sorry sweetie but its long been established that you float a silly agenda here and nobody buys it.
Try again.
Hey Cap’n Credit:
Correct me if I’m wrong -
You think that the posters who take issue with you are really one blogger using different handles?
A la one big nasty ol’ Gekko who also goes by pv tom?
I’m serious…I really want to know.
Are you that much of a drama queen that you have to know?
Cap’n:
I asked you first.
(Did you ever think that maybe, just maybe, the man featured in the Herald article had long belonged to the formerly 40 percent of American adults who had never before been able to break into home ownership?)
Your number is a little high. It’s kind of like taking the entire population of adults, including those in their early 20s and those over 65, and pointing out that many do not have children.
If a house is to be a home, then there is no reason to buy one until you are ready to settle down. We didn’t. There are people, perhaps, who would like to own homes and have been unable to, but it isn’t 40%.
Yup ~ I agree with you WT Economist! I’m one of those who would like to own a home and can’t. Well, not true. I can if I jump thru the same hoops those in the article did. I am 41, zero debt, $$ in the bank, excellent credit score. Limiting factors are my average income, and being a single parent (toddlers are expensive).
So, why on earth should I feel sorry for someone who bit the bullet when they couldn’t afford to when I haven’t? That doesn’t make me cold-hearted or unsympathetic. It makes me a realist.
Got it, Susan Jacobson?
But the realist in me tells me that bad things can happen to good people. After college, I lived for a time in an extremely diverse area in Milwaukee and I witnessed that phenomenon play out time after time. I am not trying to imply that some homeowners don’t deserve criticism of their choices (and, in some cases, contempt), but to lump all of them into the same basket undercuts the credibility of the messenger–and, also, in my worldview, should be discouraged in a civil society.
John Dugan on Mortgage Risk:
http://wallstreetexaminer.com/blogs/winter/?p=214#more-214
Interesting little snippet on the SWIFT plant raid… makes me rethink my belief in unfettered immigration somewhat… apparently some people out there really want these jobs.
http://www.rockymountainnews.com/drmn/local/article/0,1299,DRMN_15_5215724,00.html
MSM- from the front of yahoo
Economic growth slowed to a 2 percent pace in the late summer, more sluggish than previously thought, as the real-estate bust weighed on overall business activity.
I am in the camp that believes that the mainstream media is underestimating the economic impact of the housing slowdown, which I believe to be in the 2nd or 3rd inning.
This morning on Bloomberg On the Money (Sirius Radio) commentary by a Roger Karbaruk (sp?) offered some refreshingly clear numbers as an example of what will happen as a result of the slowdown:
1 million less homes sold
x
$260,000 approximate avg. home value
x
8% transaction costs (brokers, title, escrow, lawyers, etc)
If the math is correct, that’s $20.8 billion in the type of cash shuffling commerce that has been keeping our “its different this time” economy moving along. As an aside, ask yourself how much real “value” has been created by the folks on the receiving end of the 8%.
And this little example isn’t reflective a “meltdown” scenario where sales volume drops even more precipitously.
Now consider all the ancillary services like office clerks, Fed Ex, office supply, office space, office equipment etc. The multiplier effect of this is potentially pretty substantial.
Check out this 1989 NYTimes article on the real estate “slump” at that time. It reads almost exactly like the BS we read today. Incredible.
http://query.nytimes.com/gst/fullpage.html?res=950DE4DB1F3EF931A25750C0A96F948260&sec=&spon=&pagewanted=2
In hindsight it seems that the fallout of the late 80’s runup was best described as a rolling crash. It seemed the oil patch took an immediate hit in 1990 but the northeast stagnated for years, up until 2001.
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nice. does anyone have a link to that timeline of news headlines on housing from 1980’s-2000’s??? it’s amazing how history repeats itself.
Yes, and it repeats itself in all markets.
Tell me something. How old are you and what do you do for a living?
I’m not the only one who caught that one.
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Age 37. Salesman (B2B, complex product). B.S., Business/Marketing, $1M at 35.
Yep, I figured you were in software sales. I even guessed B2B and had some options.
Maybe you and Nina should hook up. She’s in that biz too.
http://www.sittingprettyfinancially.blogspot.com
except she thought she knew it all and lost her ass on her Palm Springs “flip”.
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not software - think finance. and i did get some options but very few - maybe made about $20k from options. had a good ESP that i took advantage of. my accumulation came from working hard, sacrifice, being a vicious saver, and dollar cost averaging into index funds through thick and thin since 1995. no windfalls or magic bullets - not to say i wouldn’t have taken them had they been offered. i’m the son of humble immigrants with a 3rd grade education who came here with nothing. my state school 4 year college education cost me about $8k total. i only asked for opportunity from this country - and i got it.
now it’s time to go back to work -
Just read her blog. What a hoot. Why would anyone put up a blog about their personal financial experiences?
As fro her Palm Springs flip, she broke even (at least that’s what I read) when she sold the condo in 7/06. Of course, she spins it by saying that she got to use it while it was being renovated, so that’s a good thing. I guess so. But she discounts the fact that she spent a ton a of time and effort on a venture that paid her $0.
I’m in software as well (linux/Unix support) and I have to tip my hat to Gekko. If you’re selling product and making numbers in todays market more power to you.
Software sales is notorious for a revolving door sales positions.
Nina claimed she broke even on that flip but we don’t know the true cost of materials for an extensive renovation, transaction costs, etc. What was galling was the assumption (on her blog) that she could just toss it on the market and walk away with 100K profit in days. We followed that pretty closely here.
I found this presumptuous sentence on her site: “You make money when you buy a house, not when you sell it.”
That about sums up the bubble attitude, no?
No. Always buy profit going in, never bet on the “come”. Always project expenses high, income low. This is the difference between investing or speculating on real estate…
she still has a a bunch of rental properties supposedly
I stopped reading her blog when it became more about her being a lesbian than financial advice.
Go to the Marin buble blog and search for headline’s on her blog. The owner of that blog did the research.
Home Prices Do Fall - A Look At The Collapse Of The 1980s Real Estate Bubble
http://nnjbubble.blogspot.com/2006/02/home-prices-do-fall-look-at-collapse.html
Last NJ Bubble stats
Peak in 1988
Trough in 1997 (nine years later!)
Prices return to a level above previous peak 2003 (15 years after bubble peak!!)
But don’t worry, folks, it is different this time
Sorry about the tag… is this better?
Here is one article from John Law’s link that caught my eye. It looks like “Bubble” is not a brand new concept.
———————————————————————-
After a Decade of Expansion, L.I. Economic Bubble Bursts
August 24, 1989, Thursday
By PHILIP S. GUTIS (NYT); Metropolitan Desk
Late Edition - Final, Section A, Page 1, Column 2, 1420 words
http://select.nytimes.com/gst/abstract.html?res=FA0714FF395D0C778EDDA10894D1484D81
As the economy slows across the New York metropolitan region and much of the Northeast, economists say Long Island is on the leading edge of the downturn. After a decade of explosive growth, the Island’s bubble has burst. As the economy slows across the New York metropolitan region…
Folks - On the sympathy vs. no sympathy issue, I will not take sides. I will point out, though, that as a resident of Boston in the early/mid ’90’s (when the last RE boom was shaking out), part of the scandal was that “main stream” banks were found to have been redlining during the run up. That means refusing to extend credit based upon street address, with no consideration of individual circumstances. This is a big no-no, to say the least.
Well, the REAL scandal only unfolded when it was discovered that many of the boiler room mortgage shops, that were essentially the only source of credit to those who, ahem, lived in a certain neighborhood, were in fact WHOLLY OWNED SUBSIDIARIES of large commercial banks.
I had no sympathy for bank executives or shareholders at pay back time, either.
That is a great story to contrast with the current “no redlining” policy, where minorities are targeted for 0% down Option ARM financing
on homes they can’t afford knowing full well that many of them will most likely go bankrupt in a few years.
I noticed that someone posted yesterday about how their 10%-down mortgage protects them from a 10% drop in prices. NOT TRUE. Putting down 10% only protects you if prices stay flat. Any drop in prices will cause you to have negative equity.
You must factor in the closing costs at the time of purchase (2-3%) and the closing costs at the time of the future sale (6-8%) of that same home. In other words, the moment you buy a house the net value of your home is already 10% less. (That’s why PMI is 20%, not 10%.)
Closing costs have been ignored recently because of the historic appreciation in RE values of the past 6 years.
Here’s an example in real numbers. Suppose you bought a home last year for $400K and you sell it in 2009 for $400K. At first glance, it would seem as if you broke even. But in actuality, the total cost of your purchase was probably $410K with closing costs. Unless you find a buyer without an agent (and few ever do), your sale at $400K will only net $372K.
$410K - $372K = $38K. You actually lose $38K even though the value of your home remains unchanged. Luckily, you put down $40K (10%) when you purchased the home and paid back a very small part of the mortgage with the 30-year fixed as well. But the $40K you thought you had in equity is almost completely gone. (BTW, I didn’t even calculate how much inflation erodes the value of your home in that four years.)
In today’s market, it’s far worse. Now let’s use the same example above (a $400K home purchase) for the typical present-day idiot who buys with zero-down and an I/O mortgage. When it’s time to sell, that buyer may think he got lucky in a down market by “breaking-even” by selling for $400K in 2009. But he’ll actually owe almost $40K at the closing table if he does so. And I’m willing to bet that most of those who got a zero-down loan have NO financial reserves. (Isn’t that why they got the zero-down loan?)
This example is another part of this bubble that is getting overlooked. Even if your home’s value stays stable for the next few years, it’s still going to cost you big dough to sell it if you put down anything less than 10%.
In years past, few people were buying homes with less than 10% down (almost none bought with zero down), and houses in most parts of the country could be bought for less than $200K. So even when those same few people tried to to sell those homes at that same $200K, they often would take a loss at closing and have to pony up no more than $10K or so. That stung, but it was usually manageable.
But today, we have an untold amount of home-owners who have zero equity in homes worth $300K-$900K. Most of those people cannot afford to sell even if the value of their homes remains the same.
Unfortunately, some of them will HAVE to sell for what ever personal reason occurs. Those people will default on their loans as well.
I agree with your numbers. Everyone may have to sell for some reason or another within a few years when they buy their home. I also have folks who have been in their home 40 years and now they are selling. So when they tell me what they paid for it then it is mind boggling. A question that needs to be asked today is not how long they have owned their home is how much do they owe on their home. To many home equity’s out there. I have had folks tell me it is better just to walk away. But, first they pull money out, buy a second home and then walk away. Buyers will have a field day soon with the forclosures.
Last time down in Socal I personally new 5 or more people who did just this. The new bankruptcy law are in part designed to discourage the practice.
They also all got hit with sizeable cap gains on the banks write down.
“But, first they pull money out, buy a second home and then walk away.”
Glenda — hopefully you have refused to deal with anyone whom you knew to be pulling this.
Oh that explains why there has been some sales .
This is the reason I think that most people will not lower their wishing prices as people often suggest here. They can’t. They don’t have the 40K to bring to closing so they can’t sell, all they can do is hold on as long as they can and wait for the bank to take it away.
Okay, this is new to me! Went to one of the local realtor websites. Along with the traditional mortgage calculator, they now have a rent vs. buy calculator.
The answer always comes out “Buy”, huh?
No! My one daughter lives in NYC and the other in the U district in Seattle. Both I have adviced. RENT!
Here’s one you probably won’t see on a realtor’s site anytime soon.
http://www.cepr.net/calculators/hb/hcc.html
Yeah, the usual rent vs. buy calculators are pretty worthless.
That’s a pretty sobering calculator. It assumes, for the example that I fed it, that the house would have an unadjusted value in 10 years that is 75% of what I pay for it today. Be sure to compare between taking the standard deduction and itemizing, everything else remaining equal. That sucker could set back my buying plans a b-u-n-c-h.
1Mil is the new 100K (also the current price for an average home in a non-coastal part of the OC). If one gets to a billion then they can take a bow.
Gekko is in NY.- $1 million is like $1,000.
Although if what he is saying about his humble beginnings and his state school education then I have a little (just a little) more respect for him.
I’ve seen some hedge fund bonus numbers. They are staggering. Over a billion in a couple of cases. Something is wrong with that.
Why aren’t hedge fund investors concerned with where that type of bonus $$$$ came from? If you want to maximize profits, isn’t part of that not giving it away to your planner? I’m wondering what % of investor profits creates these numbers.
Hedge funds usually take 2-5% on the in, and 10-20% of gains.
Brutal, but worth it for the better gains they’ve given the uber wealthy.
That money came out of somebody else’s pocket, that is for certain. It is just not entirely clear whose pocket it came out of just yet…
From Belleville, Ontario Canada -2 hours drive east of Toronto
In the local paper realtors admitted sales volume down 15%
Builders aren’t quite so busy, but with retirees from Toronto prices have remained steady.
I have been following the market in P.E.C for over a year and am patiently waiting the fall. Maybe we need to introduce a Tundra edition of this blog
Never thought I would see this: http://biz.yahoo.com/ap/061221/ye_top_business_2006_ye5a.html?.v=2
Top Biz News of ‘06: Housing’s Decline
Thursday December 21, 10:18 am ET
By Ellen Simon, AP Business Writer
Housing Market Drop Tops the Year’s Business News, Builders Nix Projects and Renters Stay Put
The nation’s house party ended with a thud in 2006, leaving everyone from condo flippers to Federal Reserve chairman Ben Bernanke waiting to see what would happen next.
The sudden stall in home sales, home construction and home prices — and what that will mean for the economy — was voted the top business story of the year by U.S. newspaper and broadcast editors surveyed by The Associated Press.
ADVERTISEMENT
At the housing market’s peak, buyers rushed to open houses, blank checks in hand. Lenders gave big-money mortgages to people who could barely afford their monthly payments. That ended in 2006, when home builders scuttled projects, walked away from land they’d hoped to develop and would-be buyers canceled orders.
The story bumped high energy prices from the top of the list, where it had been for the past two years. Many of the year’s other top business stories were the latest installments of years’-long sagas, such as U.S. auto makers’ woes and the unraveling of Enron Corp.
Some of the new faces on the list, including Hewlett Packard Co.’s former chairwoman, Patricia Dunn, and separately, the growing group of executives who manipulated their stock options, might wish they were elsewhere — even at a lonely open house.
1. HOUSING SLIPS: Moody’s Economy.com, a private research firm, projected that the median sales price for an existing home will decline in 2007 by 3.6 percent — the first decline for an entire year in U.S. home prices since the Great Depression. One reason: Speculators fled the market. Not only did they stop buying, they put properties they owned up for sale.
“Investors were a bigger part of the market than many thought, including ourselves,” Ara K. Hovnanian, the president and chief executive officer of homebuilder Hovnanian Enterprises Inc. said in June.
Don’t let this story worry you — a soft landing for housing is in the bag for 2007…
And they thought that was the financial story of the year? You didn’t even hear much about it until the last 5 months or so. They’re in for a real surprise next year!
Housing is going to be the undisputed #1 financial story of 2007. Maybe even leave “financial” out of that sentence.
From BBC News:
http://news.bbc.co.uk/2/hi/business/6200509.stm
Housing market causes revision in growth numbers. Duh?
Does this news have any implications for which side of the great divide between economists foreseeing recession and those with a faith-based conviction in a soft landing will look smart this time next year?
————————————————————————————
Philly Fed index shows factory sector contracting
By Rex Nutting
Last Update: 12:03 PM ET Dec 21, 2006
WASHINGTON (MarketWatch) — Manufacturing activity contracted in the Philadelphia region in December, the Federal Reserve Bank of Philadelphia reported Thursday. The Philly Fed index fell to negative 4.3 in December from 5.1 in November. Readings below zero indicate contraction. Economists expected sentiment to remain relatively weak at 5.3. Indicators for new orders and unfilled orders also fell below zero. Shipments remained healthy.
——————————————————————————
And is the timing of this move on the stock market related?
http://tinyurl.com/ya49a2
stock market feels like 2000 again. I watch CNBC and listen to people and I feel like I know something they don’t. it’s like the joke is on them and I’m the prankster. I had the same feeling when I read that people were camped out to buy homes in a new development a few years ago.
I’m cynical enough to believe that the MSM will never tell you what they truly believe will be the condition of our economy — until it is already history — because they have the ability to profit from that. Ben’s blog has been a crystal ball and I’ll never again believe what the MSM forecasts. Hopefully, unregulated blogs will be around as long as I need them to be.
Kind of a random statistic, but I thought I’d share:
Bloomberg just published an item on the amount of mortgage interest paid in Q3 vs. Gross Domestic Product. It turns out we spent a whopping $625 billion in mortgage interest last quarter, the most ever in nominal terms and the most ever in relation to GDP (4.72%). The chart I put up at my blog speaks volumes…
http://interestrateroundup.blogspot.com
Does anyone wonder how Goldman Sachs can afford to pay $1.6B in bonuses.
On an Orlando talk-radio show last week: GSax has 26,467 employees (+/-, obviously) and their payroll averages out to $622,000 per employee for 2006 — that averages in the stockroom clerks, etc.
Hey Mike,
Thanks! Sometimes…it’s the “insignificant” things in life, that hint at the significant.
I had a new thought. There are all these media reports that say 1 in 5 subprime mortgages will blow up and end up in forclosure once they adjust and this and that.
In old times people used PMI. But it is my understanding that many of the modern deals are a 80% and a 20% loan or such. So in this case, where the 20% 2nd mortgage is crappy finance and the 80% may or may not be… could this escape the estimates? Because it isn’t a straight up 100% loan, perhaps it goes under the radar… but still may blow up?
The 20% blows up first. If the repo’d home sells for less than 80% of the unpaid loan balance, then I guess the 80% starts to blow up as well…
One of the subprime selling points to borrowers is that there is no PMI even if the LYT is 90% or %100%..yikes
Arbor, a major builder here in Portland area, just dumped 20 townhouses in a single development (in Hillsboro) on the rental market, because they couldn’t sell these spec houses.
some housing bubble odds and ends.
“If they’re upside down, they should do everything they can to stay in the house,” Niemoth said. “They are going to have to let this market run.”
Barring that, a seller could use a lease with option to buy to cut their losses.
“If you’re paying $2,000 a month for mortgage, taxes and insurance, but your market will only allow a lease option at $1,600, go ahead and lease-option for $1,600.
“That way, you’re only bleeding $400 a month.”
http://www.heraldtribune.com/apps/pbcs.dll/article?AID=/20061130/BUSINESS/611300774
“‘It’s important to focus on where the housing market is now, it appears to be stabilizing, and comparisons with an unsustainable boom mask the fact that home sales remain historically high,’ David Lereah, chief economist for the trade association, said in a statement.”
http://biz.yahoo.com/rb/061204/usa_economy_housing.html?.v=1
“And it’s hard for sellers because they feel like they’re leaving money on the table, like they’re giving their money away.”
http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2006/12/03/REGMDMN58J1.DTL
“Declining home prices can feed on themselves once they get started, said Tom Dunn, an economist with the Colorado Legislative Council. ‘Do you want to buy something today that is going to be worth less tomorrow?’ Dunn asked.”
http://www.denverpost.com/ci_4736941
A subprime borrower with blemished credit could see a mortgage adjust by a full 3 percentage points, doubling the payments when taxes and insurance are included.
http://www.sptimes.com/2006/08/12/Homes/In_today_s_slow_sales.shtml
“‘A very large oversupply is going to hit the market,’ McCabe said. ‘There just isn’t anything to justify the volume of units that are currently under way, let alone any new units being announced.’”
“‘I don’t think there’s a glut,’ Renzi said. ‘But this is the time when people are getting scared, so it’s a good time to get in.’”
http://www.palmbeachpost.com/business/content/business/epaper/2006/06/30/a10b_condos_0630.html
‘I think there are some areas where you see some softening, but Tallahassee is strategically poised to grow.’”
http://www.tallahassee.com/apps/pbcs.dll/article?AID=/20060317/BUSINESS/603170345/1003
“I’m absolutely delighted that things have slowed down,” said Alan Nevin, director of economic research for MarketPointe Realty Advisors in San Diego.
“The last three years, from a macro-economic standpoint, have been very profitable —- and very unhealthy, because it was an abnormal rate of growth. Normally when you have a situation like we’ve had the last three years, you typically have a major correction. Fortunately, we are not going to have a major correction.”
http://www.nctimes.com/articles/2006/02/15/business/news/14_02_592_14_06.txt
Of Bubbles Past: A Chronological Listing of News Headlines from the Last Housing Bubble in Southern California
Do you like being broke? Keep renting
Pay Higher Property Taxes to Cut a Break For The Elderly and Baby Boomers
Here’s where a local town is trying to cut property taxes for the elderly and pass it on to those younger. The initial age cutoff would be 70 but there’s talk of making it a little younger in a couple years - I guess they have the older baby boomers in mind with that.
http://www.theforecaster.net/story.php?storyid=8982
Really odd — it looks like all of today’s Prudent Bear’s articles/links, except one, have been re-set to a week ago. At least, as of 9:35PM EST.
It is a week ago. Short Circuit City. I think it’s about to take a dive
(You’re right. Their servers have gremlins)